Given the significance of the Companies Law, the Guernsey Commerce & Employment Department released in 2010 for comment a consultation paper setting out the proposed amendments to the Companies Law in order to clarify current provisions, resolve certain practical issues, take account of developments in company law elsewhere and ensure that Guernsey remains a highly regarded and competitive jurisdiction.
Following circulation of a summary report on the consultation process in May 2012, the States of Guernsey on 28 November 2012 approved a lengthy report setting out proposed changes to the Companies Law and directed the preparation of legislation to effect such changes. Although it is not yet known when this legislation will be prepared or when it will come into force, we set out below a summary of the proposed notable amendments to the Companies Law. A complete copy of the Commerce and Employment Department report which sets out all of the proposed amendments to the Companies Law is available on request.
The following notable amendments have been approved in principle:
- Applications for an incorporation of a Guernsey company will also be able to be made by Advocates and accountants registered with the Guernsey Financial Services Commission for anti-money laundering and combating the financing of terrorism and anyone fully licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987; the Banking Supervision (Bailiwick of Guernsey) Law, 1994; the Regulation of Fiduciaries , Administration Businesses and Company Directors (Bailiwick of Guernsey) Law, 2000; the Insurance Business (Bailiwick of Guernsey) Law, 2002 or the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002.
- Companies will be permitted to register an alternate name in non-roman script. In addition, a company whose incorporation pre-dates a trademark with the same name will not be prevented from continuing to use that name.
- The restriction on the type of bodies corporate which can amalgamate will be removed.
- Failure by a company to have at least one director will be made a ground to strike off the company.
- The blanket prohibition on disqualified directors from other jurisdictions holding office as a director in Guernsey will be replaced with provisions which allow the Registrar to prescribe jurisdictions where he is satisfied that the processes for disqualifying directors adheres to principles of natural justice similar to that which exists in Guernsey (British Isles, New Zealand and Australia for example). Disqualifications in those jurisdictions would prevent an individual being appointed or holding office as a director in Guernsey. For all other jurisdictions the Registrar would consider the application on a case by case basis. All those who seek appointment as a director of a Guernsey company will be required to disclose all disqualifications in a country outside Guernsey.
- Directors will only be required to disclose the nature and extent of their interest in a transaction rather than the current overly prescriptive disclosures required (monetary value etc).
- The duties of secretaries will be required to be performed by the directors where there is no secretary appointed, or by either if there is.
- A unanimous resolution will be specified as one agreed to by every member entitled to vote.
- It will be possible to close the register of members during the circulation period for a written resolution so as to avoid uncertainty should the membership change during this period.
- The quorum provisions will be amended to refer only to voting rights for all kinds of company (rather than referring to share capital). Also, subject to appropriate safeguards, the variation or dis-application of the quorum requirements for variation of class rights meetings will be permitted.
- The requirement for a detailed description of share capital in the annual validation is to be repealed and corporate service providers will be permitted to sign a declaration of compliance (annual validation) on behalf of a director/secretary.
- A protected cell company will no longer need to prepare consolidated accounts for its core and its cells but may prepare them individually.
- Provisions relating to appointment of auditors will be simplified.
- Directors will be given a general power to issue shares to the extent permitted by the memorandum and articles or by ordinary resolution.
- There will be an express provision allowing for the distribution of paid up capital, including by way of dividend, subject to the solvency test.
- There will no longer be a requirement to issue a consideration certificate when issuing shares.
- A time limit of two years for the recovery of distributions from members when immediately after the distribution the company did not satisfy the statutory solvency test will be introduced. Further, a 'whitewash' provision will be introduced in respect of directors' personal liability in situations where the company would have passed the solvency test at the time of distribution and time of recovery.
- Currently directors must have taken 'every step' to minimise potential loss to the company's creditors to avoid civil liability for wrongful trading. This threshold will be amended to 'every reasonable step' to avoid an unreasonable burden being placed on directors.
In addition to the matters set out above, the Department has identified a range of other ancillary amendments that are required including:
- Procedures for amalgamating subsidiaries will be simplified.
- Provisions relating to redemptions of shares should permit partly paid shares to be redeemed.Provisions relating to when a company is authorised to purchase its own shares will be simplified.
- The definition of "director" will be clarified to ensure the obligations and rights of directors, alternate directors and shadow directors are clear and explicit.